With Bitcoin spiking more than 120 percent since the beginning of 2019, the US Internal Revenue Service (IRS) states that an updated set of policies has been prepared to cover cryptocurrency taxation.
IRS Prepares Further Crypto Tax Guidelines
In a letter to a two-tiered group of US Congress members, IRS Commissioner Charles Rettig stated that clear guidelines for Bitcoin tax were a top priority for the agency. The letter was in response to a letter from April 201
An excerpt from Commissioner Rettig's answer reads:
I share your belief that taxpayers deserve clarity in the basic problems associated with virtual currency transaction taxation and have made it a priority for the IRS to issue guidance. Specifically, your letter (1) mentions acceptable methods of computational cost basis; (2) acceptable methods for cost-based allocation and (3) tax treatment of forks. We have reviewed these issues and intend to publish guidance that addresses these and other issues soon.
The timing of the IRS Declaration comes as Bitcoin in enjoying a strong price jump, which has more than doubled since January 2019.
How timely … BTC spikes and IRS commissioner decides to comment;)
– Crypto Tax Girl (@CryptoTaxGirl) May 21, 2019
As previously reported by Bitcoinist on several occasions, there has been a demand for a more definitive structure for Bitcoin taxation in the United States. Several institutions and stakeholders have rejected the ambiguous character of the current IRS cryptographic framework developed in 2014.
Both the American Institute of CPA and the Treasury Department have previously encouraged the IRS to provide clear guidance on the Bitcoin taxation process. Many critics of today's framework say taxpayers carry too much of a burden trying to follow preventive measures to avoid falling into trouble with cryptocurrency-related tax evasion charges.
Bitcoin is both currency and property
back in 2014, the IRS chose not to recognize Bitcoin and other cryptos as currencies, characterizing them as property. Thus, their exchange falls under capital gains tax.
Until 2018 and the IRS says cryptos is a digital representation of value like traditional fiat currency. This statement opens the door to income tax considerations for virtual currency transactions.
Buy crypto is not a taxable event.
Selling cryptos for fiat (eg, USD) is a taxable event.
Acting a Coin for
Crypto Tax Girl (@CryptoTaxGirl) July 11, 2018
Then there are the implications of using an encryption code to purchase goods or services. Bitcoin and other cryptocurrencies to make purchases. Back in March 2019, Bitcoinist reported that the proposed Bitcoin for Starbucks coffee as part of the Bakkt-Starbucks agreement could raise additional tax for tax storage.
I am trading "magic internet money" on infrastructure It does not belong to any sovereign state, it is a non-productive asset, depending on 0 state-owned commodities, to avoid sovereign theft, including taxes.
Payment of "capital gains" for such activity is such a joke LMFAO
Dovey Wan 🗝 🦖 (@DoveyWan) May 20, 2019
However, industry stakeholders believe that cryptocurrency should not fall under state tax. Tweeting on Monday, Dovey Wan of Primitive, stated that paying capital gains tax on encryption transactions was "a joke."
Do you think that taxes on cryptos are legal? Please let us know in the comments below.